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Adoption of Integrated Cold Chain Models to Boost Investments - Ken Research

23-Jul-2020   Mr. Yogesh, Designation: North Head, Sical Logistics   Author: Harsh Mittal

The Cold Chain Market in India has not been impacted drastically by the pandemic as compared to other sectors, since most of the commodities transported through Cold Chain are essential commodities such as milk, diary, sea food, fruits and vegetables. Most of the cold transportation is done by Road, majorly used for Long International bulk quantities and Express movements. Many food delivery start ups, Food processing and Pharmaceutical companies, Agricultural Units are increasingly using Cold chain services due to additional subsidies given by the Government. This could be a game changer for the industry in the coming years.

In conversation with Mr. Yogesh, North Head, Sical Logistics we attempted to seek his opinion and understand his side of story on the ‘Indian Cold Chain Market. Here are some excerpts of the interview:

Q1. How is the Indian Cold Chain Market transformed in the last 5-10 years?

The market has been tremendously growing in the past five years. Technology is one key parameter that has shaped the cold chain Industry in India. Earlier, No company was accepting EPODs and e Payments but now companies are taking efforts and moving towards online billing, GPS Tracking-Tracing and Temperature Monitoring to win over their clients.

Q.2)  According to National Cold Chain Development Board, There are only 15,000-16,000 reefer trucks available in India, though the demand is 10 times higher than that. What is your view point on the same?

I think there is huge gap in demand and supply but there are around 30,000-35,000 reefer trucks available in India as per our Internal Research. Earlier, Only Pharma companies were using Reefer trucks for its operation but in the past 5 years many food start ups such as Zomato, Swiggy and more have started making extensive use of Cold transportation services in the country.

Q3. Based on the analysis of the leading Cold chain Players such as Singhania, Cold Ex logistics, Snowman logistics and more, the revenue earned by an average reefer truck is INR 30 Lakhs per year. Do you find this estimate to be reasonable? Also, Can you tell us that what percentage of total reefer trucks available in market are small, large and refrigerated Containers?

No, I think that the average truck typically earns 40- 45 lakhs per year.  The smaller reefer vans with capacity less than 5 ton earns around 15-20 lakhs annually and  Large vehicles such as 20 foot, 32 foot trucks with capacity of less than 7 tonnes earns 36-40 lakhs per year. Also, the refrigerated containers with capacity of 7 tonnes earn 55-60 lakhs per year.

According to my knowledge, the share of smaller refrigerated vans is higher than large vehicles, around 40-45% with 20-25% large vehicles operating in the country. Remaining share of ~ 30% are Refrigerated containers which are significant part of the market, very effective in maintaining hygiene and quality of the product.

Q4. If we divide the Cold transport market on the basis of mode of transportation that is Air, sea and land, what is the percentage share of each mode in terms of revenue generation?

In terms of revenue, Road dominates the market as sea is only used for perishable for long International movement but domestic is primarily catered by road only. 50-55% of the revenue is earned by road, 20-25% by sea and rest by Air. Air movements in the country for perishables are quite less and are primarily used for Vaccines, drugs, medicines which are required on an urgent basis.

Q5. If we divide the market on the basis of type of industries such as meat and seafood, fruits and vegetables, dairy products, Pharmaceuticals bakery and confectionery by revenue. Which category is earning more revenue?

I think meat and seafood dominate the category due to big processing players such as Suguna, Licious and others, earning 30-35% revenues of cold Chain market followed by dairy products with 30-35% revenues. In Pharmaceutical, there are two type of products- dry and temperature sensitive products but now-a-days, the percentage share of temperature sensitive drugs is quite less. Hence it should constitute 20-25% share in the market. Food and vegetables will constitute only 10-20% share in the market due to seasonality of the crops.

Q6. In the last 5 years, what has been the growth in the number of reefer trucks in India? Also, what is the revenue growth per truck in the past 5 years? According to our estimates, around 20% of the total Cold Chain revenue is constituted by Cold transportation. Do you agree with this?

In the last 5 years, more companies are moving towards cold chain due to higher revenue potential in comparison to dry vehicles. In terms of the vehicles, there has been 23-25% y-o-y growth in the past 5 years.  The revenue earned per fleet varies on the basis of occupancy rate and fleet type but on an average, it is growing at 5-6% every year. Also, I think 60% of the revenue is constituted by Storage and 40% by Cold transport.

Q7. What is the future anticipation of Cold transportation market? How is COVID-19 expected to impact Cold chain market in future?

The future is quite bright with many companies and Investors investing in Cold transport Segment. The industry will see a dip because of COVID-19 due to slowdown in 3-4 months but is expected to revive back and will not have any negative impact on Cold chain. The revenue may reduce but occupancy is expected to remain stable as the companies who are producing essential goods are providing even more business to the Industry than before

For any queries or feedback, reach out at namit@kenresearch.com

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